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Many companies underestimate the importance of the Wage and Social Dumping Prevention Act (LSD-BG) in Austria and the associated penalties. Even though it is not a new regulation, there are still considerable misunderstandings about the importance of appointing a responsible officer.
Contents
The Act to Combat Wage and Social Dumping
Despite the fact that almost all employees in Austria are covered by collective agreements, in many cases they are not paid the remuneration to which they are entitled for their work. This has a negative impact on those affected and also jeopardises fair competition between companies. The Wage and Social Dumping Prevention Act (LSD-BG), which has been in force since 1 May 2011, is intended to counteract this development. The amendment by Federal Law Gazette I No. 174/2021, which has been in force since 1 September 2021, brought important changes to the penalty provisions by abolishing the accumulation principle and now imposing penalties regardless of the number of employees affected.
Possible penalties for non-compliance
The importance of the LSD-BG and the associated penalties are underestimated by many companies. However, it is crucial to take the regulations seriously, as non-compliance can lead to significant financial consequences:
- Failure to keep or submit payroll records can result in fines of up to EUR 40,000 per responsible person (EUR 20,000 for the first offence, up to EUR 40,000 for repeated offences)
- Deliberate underpayment of wages can even result in fines of up to EUR 400,000 per responsible person.
- Furthermore, failure to notify a posting or transfer to Austria (ZKO 3 / ZKO 4 notification) as well as late notification or failure to notify changes can lead to considerable penalties.
Centralisation of responsibility and risk reduction
In principle, administrative criminal proceedings can only be conducted against natural persons. However, as employers are usually legal entities in practice, the persons appointed to represent them externally (e.g. the managing directors of a limited liability company or the management board of a public limited company) are generally responsible under administrative criminal law in these cases.
However, under the VStG and LSD-BG, responsibility under administrative criminal law for compliance with regulations can also be transferred to so-called responsible authorised representatives, which has a number of advantages. This centralises responsibility and thus reduces the "diffusion of responsibility" risk. This refers to the risk of relying on other management or board members to assume responsibility, which ultimately means that no one takes clear responsibility for compliance with regulations. As the fines are not divided up but apply to each responsible person in full, the appointment of a responsible person can greatly reduce the fines to be paid in the event of a breach.
Requirements for the appointment of a responsible authorised person
The appointment of a responsible authorised person is crucial for the clear assignment of areas of responsibility within a company. The following requirements must be met for the appointment:
- The person can be appointed either from among those appointed to represent the company externally or from other groups of people, but only for clearly defined geographical or functional areas. It is particularly important to define these areas precisely in order to avoid overlaps and ensure the effectiveness of the appointments
- The appointment must be made by the bodies appointed to represent the company externally and requires written notification and the consent of the appointee (e.g. managing director, branch manager, site manager, regional manager). The revocation or resignation of responsible authorised representatives must also be communicated in writing.
- The notification can be made using the form or online at the Central Coordination Office.
- The Central Coordination Centre is responsible for appointing a responsible officer for compliance with the Act Governing the Employment of Foreign Nationals (AuslBG). The appointment is made by domestic Austrian companies using form ZKO1-I. The Central Coordination Centre is also responsible for foreign companies based in the EU/EEA. In this case, the notification of a responsible authorised representative in accordance with the Wage and Social Dumping Prevention Act is made using form ZKO1-A.
- The respective health insurance institutions are responsible for the appointment under the LSD-BG with regard to domestic companies. The notification must therefore be submitted to the respective health insurance provider.
Prerequisites for a valid appointment of a responsible authorised representative are also:
- Proper written notification of the appointment
- with the verifiable consent of the appointee and the employer, and
- a timely transmission to the Central Coordination Centre or the health insurance provider (before the start of the secondment or assignment of employees)
It should also be noted that the departure of the appointee from the company or the cancellation of the appointment must be reported. Form ZKO1-W must be used for this purpose.
Do you have any questions?
If you have any questions about the LSD-BG or the standby obligations, or if you need support in appointing a responsible officer, we will be happy to assist you.
Senior Managerin
